According to research by McKinsey, the companies that recovered best from the 2008 financial crisis were the ones that got out of the starting gates fastest and came out of survival mode sooner and more assertively. Not only did they recover faster, but this upwards trajectory stayed with them for the better part of a decade. Conversely, those organizations that did not embrace a growth mindset soon enough, not only struggled to recover from the recession, but they kept struggling for the next 10 years.
We’re already seeing a similar split trajectory two years into the Covid-19 pandemic. In what economists are calling a K-shaped recovery, some people, companies and industries are thriving (the upward arm of the K). Others, unfortunately, are still languishing in the downward arm of the K.
While of course there are a myriad of factors at play here, research has shown that the adoption of digital technology has contributed to organizations better weathering the pandemic storm. Again, there are multiple ways technology can drive growth and profitability by helping companies become more agile, flexible, resilient and better able to serve customers who are predominantly digital themselves.
But, I’d argue, a very important way technology drives growth is by introducing efficiencies into our business. These efficiencies free us up to focus on the work that will drive growth, acceleration and the big strategic moves we need to make today to thrive tomorrow. Further, these efficiencies improve user and customer experience, which in turn drive growth and success as well as overall happiness. Without these digitally-enabled efficiencies, we risk being stuck on the hamster wheel of time-consuming, risk-of-zero-return work.
Unfortunately, however, it looks like much of the CRE industry is reverting to pre-Covid ways of working as soon as they can. This opens the field for the savvy companies and brokers, who are leaning into digital more than ever before, to surge ahead.
CRE, digital technology and the pandemic
The overnight shift to working from home in March 2020 has become shorthand for the dramatic change we all had to make in our personal and professional lives at the start of the pandemic. The CRE industry was arguably hit harder than many others in two main ways.
First, many brokerages weren’t set up for a rapid transition to remote working, collaborating with colleagues online, accessing the files and information they needed securely, and generally working from home. While larger firms were able to deploy IT resources to quickly get people situated, most groups were not large enough to benefit from an in-house IT department and were on the back foot.
Second, the industry basically stopped. We work in one of the only industries quite literally involved in filling physical spaces – which was now a health risk – and most deals ground to a halt. Not only were tenants hesitant to even consider space again, but brokers, used to a very hands-on role that involves seeing space, touring clients, and meeting prospects, suddenly had their worlds completely disrupted. And while investment deals were proceeding, the safety of the deals was being questioned. The security of people’s home computers and networks suddenly became of critical importance.
Although everything around us seemed new, the technology that we used to fill the gaps wasn’t, for the most part, itself that new. Zoom video conferencing, for instance, which has been around since 2011, saw use skyrocket. In December 2019 it had 10 million daily meeting participants. This grew to 200 million by May 2020, and 300 million the following month. Zoom’s sales grow by a whopping 326% to $2.6 billion in 2020! Similarly, it has long been possible to carry out virtual property tours or sign documents electronically, or make and receive payments via bank transfer rather than check. It just appears we needed a pandemic to motivate us to change how we work.
What’s interesting though, is that although the industry demonstrated it could harness technology when it needed to, and especially the technology that would drive deals across the finish line, it seems that despite the efficiencies that came along with this tech, we’re mostly reverting to the traditional ways of doing things. This “if it ain’t broke, don’t fix it” mentality is known as cognitive entrenchment and is common amongst people with extensive experience. While the experienced veteran generally trumps the novice, the rules change during times of uncertainty, instability and rapid change. Then, the novice, who is open to trying new things to adapt to a new world, gains the advantage.
Because the reality is, the typical ways of working are broken, if you want to be on the upward arm of the K, that is. The efficiencies gained by doing things digitally will compound into faster deals, happier clients and more time spent on setting up the next deal.